State of Ukrainian metallurgy during the war

Last year’s results were significant for Ukrainian metallurgists.

For 2021 were produced:

– 21.2 million tonnes of pig iron,

– 21.4 million tons of steel,

– 19 million tons of rolled products.

Ukraine ranked 14-th in the global ranking of steel producers. The geography of exports is global – from countries in the Middle East to North America and Asia. For many Ukrainian metallurgical companies, 2021 was the most successful in a long time. Revenues from exports of ferrous metals increased by more than 81% (up to 14 billion dollars) compared to 2020.

In the pre-war period, in January-February 2022, export earnings of metallurgical enterprises increased by almost 35% compared to the same period in 2021. We are currently seeing a significant reduction in production in the metallurgical sector. For the first 5 months of 2022, the production of metallurgical enterprises is about 53% of the same period in 2021. Exports of iron ore decreased by 33% compared to the same period in 2021, exports of pig iron by 50% and exports of semi-finished products by 45%.

Many companies have temporarily suspended their operations due to security due to their proximity to hostilities. Such enterprises as Azovstal and MMK named after Ilyich, stopped working completely due to the occupation and significant damage. However, now metallurgy is starting to resume its work and is actively fighting the existing challenges.

Disruption of logistics chains

The problem is both with the supply of raw materials for production and with the shipment of goods to consumers. The main sales channel for metallurgical products were ports. Due to the destruction of port infrastructure and the blockade of the Black Sea, these sea routes remain inaccessible. Europe lost 70% of its supplies of slabs, and about 50% of its cast iron. Ukrainian metallurgical enterprises are now being actively reformatted for logistics by rail, road and barge through Danube ports. There is active cooperation with local (Ukrzaliznytsia plays an important role) and foreign operators. Establishing fast new logistics routes, communicating effectively with international logistics operators and promoting a rapid response to new logistics needs is now a major challenge.

Search for new customers

The change in logistics routes has led to a change in markets. Companies are actively working to find customers in new markets. Even with the abolition of tariffs in some key markets, it still takes time and resources to find customers, negotiate and sign contracts. It is necessary to continue active work on the elimination of trade barriers for Ukrainian products to increase their competitiveness in international markets. According to the GMK center, the losses from the introduction of trade barriers in foreign markets for Ukrainian metal products are estimated at about $ 3 billion in export earnings.

Now, domestic demand for the construction and machine-building industries is gradually recovering, as more and more companies resume business activity in relatively safe regions (even in Kharkiv and Sumy oblasts) and after relocation of production facilities. Also, there is a high demand for products for the defense complex (steel for the production of bulletproof vests of the required strength, or seamless pipes to restore communication needs). Many enterprises have been repurposed for current military needs.

Conclusion

Ukrainian metallurgy has faced enormous difficulties, but already now, thanks to significant efforts and rapid response, there is a recovery of the metallurgical industry. The main players expect further resumption of business activity and the earliest possible start of reconstruction and rebuilding of Ukraine. For now, we need to get maximum assistance from international partners in logistics and markets.